Nostra Terra pleased with Pine Mills progress

The AIM-traded firm confirmed 428 Mbbl gross proven developed reserves at Pine Mills, or 265 Mbbl net oil to Nostra Terra after royalties.

An NPV10 valuation of $2.655m was assigned to Nostra Terra's 80% working interest in the field, using 7 December 2016 WTI pricing.

The NPV10 was based only on proven developed producing and proven developed non-producing estimates, the board said.

Calculations were yet to be made on proven undeveloped, probable and possible reserves, the board added, leaving further exploration and development upside potential at Pine Mills

The NPV10 calculation was to be used to facilitate hedging of future production.

Looking at its strategy update, the company had previously announced that its current strategic focus was on securing cash generative, conventional oil producing assets, which primarily include operations.

That was the key rationale behind the disposal of the interest in the Chisholm Trail Prospect for $2.1m, which was subsequently increased to $2.7m, and the acquisition of the 80% working interest in Pine Mills.

“Although Nostra Terra expects to broaden its acquisition criteria in 2017 to include projects with more exploration potential, in the interim the focus is on securing assets which can make an immediate contribution to the bottom line,” the board explained in a statement.

“Having achieved an overall reduction in overheads of 40% in early 2016, Nostra Terra is now well positioned to benefit from this approach as the company moves towards becoming cash flow positive.”

As part of its renewed strategic focus, the board has decided to relinquish the Paw Paw prospect and divest the White Buffalo prospect, where any funds raised from the divestiture will be invested into core areas.

In the current oil price environment the board said it believes there are better potential exploration and development opportunities elsewhere and that deploying additional company funds to either project would not be in the best interests of Nostra Terra.

“In the second half of 2016 Nostra Terra successfully sold its stake in the Chisholm Trail Prospect at a profit,” said CEO Matt Lofgran.

“The asset was producing approximately 50 barrels of oil equivalent per day net to the company, ultimately selling for $2.7m.

“In purchasing Pine Mills for less than half this sum, we've managed to increase overall net production and reserves within the company, have achieved operator status, and significantly strengthened our balance sheet.”

Lofgran said many industry analysts believed the marker was now at the bottom of an oil price cycle.

“The board agrees with this and feels it is an opportune time to acquire producing assets and grow reserves.

“Incremental increases in oil prices can have a multiple effect in increasing free cash flow, given the relatively fixed nature of operating expenses.”